There are six areas of risk frequently capitalized upon by embezzlers. While these areas of risk are not the only ones containing “embezzlement windows of opportunity”, these are the areas that offer the most significant sources of exposure to your company. What are common embezzlement schemes?
For our purposes Embezzlement Schemes are defined as misuse or misappropriation:
Misuse is abuse of privilege or position without a specific intent to steal.
Misappropriation is the taking of funds or property with a specific intent to steal.
Implementing policies and procedures reduces your risk of embezzlement, limits employee opportunities to embezzle, and can stop these common embezzlement schemes from happening at your company. Let’s start by defining embezzlement risk.
Common embezzlement schemes are most often committed by line personnel (both new and experienced), and by their immediate supervisors. The most effective accounting internal controls for preventing these crimes are:
The most frequently-identified examples of negotiable document embezzlement are the negotiation of;
These types of common embezzlement schemes are committed by all levels of employees, often using documents that are stolen and forged; negotiated after reported void; or negotiated after payee and/or amounts are altered. The most effective methods for preventing this type of common embezzlement schemes is by:
The most frequently-identified examples of credit embezzlement involves the manipulation or creation of:
These types of common embezzlement schemes are committed by all levels of employees, and require the manipulation of account information; generation of phony accounts; or the use of fictitious identities. These crimes may also require the co-operation of personnel working at other companies. The most effective internal controls for preventing common embezzlement schemes are by:
The most frequently-identified examples of common embezzlement crimes involving items delivered or received include the conversion of:
These types of embezzling schemes are committed by all levels of employees and involve the taking or misapplication of instruments or other property delivered to the company. In addition to product inventory, these items are often intended to be used as collateral or to be held for safekeeping. The most effective embezzlement prevention procedures for preventing these crimes are by:
The most frequently-identified examples of wire transfer crimes involve the manipulation or alteration of:
These crimes are committed by employees who are either assigned to the wire transfer function, or who coordinate the theft with another employee who is assigned to the wire transfer function. Theft by wire transfer may also be committed by an external source, often based on information made available by an internal source.
The most effective methods for preventing such embezzlement plans is by:
The most frequently-identified examples of computer embezzlement involve the manipulation or employment of:
These computer crimes are committed by employee embezzlers who are either assigned to the data processing function, or who coordinate the theft with another employee who is assigned to the data processing function. Computer frauds are committed by means of unauthorized access to, or manipulation of, a computer system by either internal or external sources. The criminal’s goal is to transfer or credit funds to his/her accounts, to transfer title to property, or to impair the ability of the company to conduct business.
The most effective methods for preventing computer crimes are by developing and enforcing written computer system security policies and procedure that require the company to:
There are six areas of embezzlement risk that may be used to commit common embezzlement schemes. These are the areas that offer the most significant sources of exposure to your company: By containing “embezzlement windows of opportunity” with internal controls, you can significantly reduce the exposure your company has to embezzlement fraud.
Although the number of methods used to commit the financial crime of embezzlement is only limited by the embezzler’s imagination, there are a number of techniques that are considered the most common embezzlement schemes used by embezzlers. Is your accounting management system open to fraud? It may be more open than you think. Employees may misuse or misappropriate funds or property in a variety of ways.
Particularly signature cards at financial institutions, powers of attorney, money orders, travelers and cashier’s checks made payable to the company.
Using on-line computer systems, and making “adjustments” to accounts, particularly dormant accounts.
Merchandise, cash, computer data and account information can be hidden in the company’s garbage container for retrieval by a confederate.
This includes phony loans, lines of credit, and other related types of credit frauds.
Holding “favorite customers” and employees’ post-dated checks, until they can make a corresponding deposit to the paying financial institution, for a fee.
Assisting a customer or another employee in operating credit, interest and check kites, and “bust-out” schemes, for a fee.
Not counting out exact change correctly is obvious, but a ticket taker can take your ticket and then resell it later.
Although the number of methods used to commit the financial crime of embezzlement is only limited by the embezzler’s imagination, this listing highlights embezzlement risks and the techniques most frequently used in common embezzlement schemes. So what can you do about embezzlement?
Use the Embezzlement Prevention Guide to reduce your exposure to waste, fraud, and abuse of the financial assets in your company. You can also download Free Sample Procedure Templates to see how easy it is to edit MS Word Templates to build your own policy and procedure management system.